Yardeni sees global stocks outperforming U.S. on hopes conflict is nearing end

Yardeni Research says global equities could outperform U.S. stocks if a U.S.-Iran peace deal holds and oil prices keep falling, reinforcing its "Go Global" view. It cites strong YTD gains in South Korea (+87.2%) and Taiwan (+52.4%), plus the Emerging Markets ex-China ETF (+31.5%) versus the S&P 500 ETF (+9.3%). The U.S. forward P/E of 21.3 compares with 13.7 for the rest of the world, with Germany highlighted as a key beneficiary of lower energy prices.

Analysis

The market is likely underpricing the second-order effect of lower oil: this is not just a macro relief trade, it is a relative earnings transfer from the U.S. toward energy-importing regions. If crude stays soft, the biggest beneficiaries are not just cyclicals in Europe and Asia, but the parts of the market with the highest operating leverage to input-cost compression: autos, chemicals, transport, industrials, and small caps tied to domestic demand. That matters because the U.S. has carried a premium on growth and margin resilience; cheaper energy narrows that advantage while improving earnings breadth abroad.

The most asymmetric setup is in Europe and parts of EM where valuation is still below history and revisions can accelerate quickly if energy bills keep falling. Germany is particularly interesting because the trade is not just "Europe beta"; it is a potential re-rating of a heavily discounted industrial base whose earnings are highly sensitive to gas and power prices. In Asia, the AI/semiconductor winners already have momentum, but a benign oil backdrop gives room for the broader market to participate, which is usually the point where performance becomes harder to fade.

The main risk is that this is a headline-driven regime trade before it becomes a cash-flow trade. If the ceasefire narrative breaks, oil can rebound sharply in days, while equity leadership shifts more slowly over months; that asymmetry argues for using options or relative-value structures rather than outright beta. A second risk is that the market has already crowded into international allocation themes, so the easy part of the move may be behind us unless earnings guidance confirms the macro story. The contrarian view is that U.S. outperformance could persist if lower oil is read as growth scare rather than a pure tax cut, especially if global PMIs roll over before margin relief shows up in numbers.

Key Decisions for Investors

• Long VGK / short SPY for the next 2-3 months: prefer a relative-value expression on the global reallocation theme rather than outright risk-on; target a 3-5% spread move with tighter drawdown control if oil snaps back.
• Buy call spreads on EWG or EFA with 6-9 month tenor: this captures a European/DM re-rating if energy remains subdued, with defined downside versus owning spot equity beta.
• Pair long EWG vs short XLE: if crude stays under pressure, European industrial sensitivity and lower input costs should outperform U.S. energy equities; this is highest conviction on a 1-2 quarter horizon.
• Add selective EM exposure via EEM or EEMA, but hedge with a crude call spread: EM should benefit from cheaper imported energy, yet the hedge protects against a geopolitical oil spike that would hit the basket quickly.
• If you want single-name exposure, favor German industrial exporters and transport beneficiaries over broad banks; the former have cleaner operating leverage to lower energy costs, while banks are more dependent on rates and credit, not the theme here.